Adjusted earnings per share amounted to US$1.43 in the third quarter, the company said. Analysts had expected US$1.36.

Key Insights

Heated tobacco shipments rose 85 per cent, ahead of estimates. That business is now gaining a new major market as sister company Altria Group Inc. started marketing IQOS in the U.S., beginning in Atlanta. Incoming bans of flavored e-cigarettes are likely to give IQOS a competitive advantage, according Wells Fargo analyst Bonnie Herzog.

While investors pin their hopes on the future growth potential of IQOS, traditional cigarette volumes continued their decline with a worse-than-expected 5.9 per cent slide.

Philip Morris lowered its forecast for full-year diluted earnings per share to at least US$4.73 at current exchange rates. That’s partially due to a tax issue in Russia, where authorities said Philip Morris underpaid excise taxes and VAT by some US$374 million. The company has paid the amount in full and said it may mount a legal challenge.

The decline in cigarette consumption translates into excess production capacity. Philip Morris may cut some 950 jobs as it considers ending cigarette production at a plant in Berlin by January, which is expected to lead to significant costs, which aren’t yet included in the forecasts.

Market Reaction

Philip Morris shares have gained 18 per cent this year. The shares are up 1.2 per cent in early trading in New York.